The Upsides and Downsides of Offshore Property Investments04 July, 2016
Upsides:1. Diversify your investment portfolio. Having a property overseas avoids having all your eggs in one basket as it allows you to spread your wealth. An example is currency diversity, in which you wouldn’t put 100% of your investments in one currency and thus, avoiding your investment prospects from being completely dependent on a particular currency. Many investors from Hong Kong invest in offshore property because overseas markets are heavily regulated and highly transparent with prices that have historically increased.
2. Tax Rebates. Overseas real estate is tax-efficient as it allows the reimbursement of VAT (value-added tax). This means that you pay the pre-tax price for a property valued at a price including the tax. To see if you can enjoy VAT exemption, click HERE.
3. Security. Property is considered a hard asset, which implies it’s a secure and sensible option. Unlike assets like stocks and bonds, the value of a property cannot go to zero (especially with the increasing demand and limited supply of land). Other than that, overseas property enjoys international asset protection.
If you are looking to invest in offshore property markets, we at www.monexo.co provide easy loans of up to HKD$500,000 with flexible repayment of 6 to 48 months.
Downsides:1. High Maintenance Costs. You have to visit and maintain the overseas property yourself or trust a third party. Property may be priced at a lower price to overshadow the high maintenance costs, which may lead to a higher potential financial loss. Moreover, it is important to note that maintenance issues directly impact rental income.
2. Returns depend on exchange rate. The cost and return of your overseas property investment depends highly on the exchange rate. This increases the risk of investment, so be sure to invest in a country with a favorable future. A recent example is the impact Brexit has had on the UK property market. With the sterling reaching historical lows, foreign demand for UK property has increased perceptibly. However, the returns from selling UK property has decreased as well.
3. Economic Uncertainty. Economic uncertainty is directly related to property value. Using the example of Brexit once again, there is tremendous amounts of economic uncertainty surrounding the UK property market. Foreign investors are unsure of the political direction, which is a decision-making factor. Economic uncertainty cannot be predicted, which makes it a downside in offshore property investments.
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"12 Reasons to Buy Real Estate Overseas". U.S. News. Web. Kathleen Peddicord.
"Pros and Cons of Offshore Investing". Investopedia. Web.